The impact of rapid inflation, debt crises, and the cost of living crisis have pushed the concerns over looming climate change further down the corporate agenda.
The three risks have been cited as the biggest threats to doing business over the next two years in G20 countries, according to new data from the World Economic Forum.
According to the survey results, interlinking economic, geopolitical, and societal risks are dominating the risk landscape among G20 business leaders, as they continue to address immediate concerns around significant market turbulence and intensifying political conflict.
Rapid and/or sustained inflation is the most commonly cited top risk in G20 countries surveyed this year, with over one-third (37%) of G20 countries identifying it as a top concern, followed jointly by debt crises and the cost of living crisis (21%). Geo-economic confrontation was identified as the top risk by two G20 countries. Other respondents referenced the potential for state collapse and lack of widespread digital services and digital inequality as top concerns.
This year’s findings, which saw 12,000 business leaders from 122 countries asked for their views, were in sharp contrast to 2021’s findings, particularly in key areas such as technological and environmental risk. Despite mounting environmental pressures and rising environmental regulation over the last 12 months, and factoring in adjustments to the list of risks surveyed this year in response to evolving economic, geopolitical, and environmental trends, environmental issues featured significantly lower as a top five risk for G20 countries in this year’s report, compared to 2021. Further, despite the growing threat of cyber-attacks on critical infrastructure, this and other technological risks ranked among the least commonly cited top five risks this year.
Peter Giger, group chief risk officer, Zurich Insurance Group, said: “After a jump of 2 billion tons in 2021, the rise in global CO2 emissions this year is much lower – closer to 300 million tons. This is thanks to growth in the use of renewable energy and electric vehicles. Despite of these positive developments, we are still not on track to reach the 1.5°C target. The transition to net-zero has dropped too far down on the short-term agendas of many business leaders. Yet the impacts of climate change are both short term and long term. Even in the current geopolitical and economically challenging environment, we need to focus on building a cleaner, more affordable and more secure energy system, if we hope to keep a net-zero future within grasp.”
More broadly, the findings also highlight marked regional variations between the advanced economies and emerging markets. While the economic risks associated with rapid and/or sustained inflation were identified as the top risk by respondents in Europe, Latin America and the Caribbean, and East Asia and Pacific, societal concerns associated with the cost of living crisis dominated in the Middle East and Africa and Sub-Saharan Africa. In Central Asia and South Asia, interstate conflict and debt crises topped concerns respectively.
The WEF explained: “With growth in many large economies stalling and debts mounting, ‘rapid and/or sustained inflation’ and ‘debt crises’ featured among the top ten risks in every region
“In a year of notable extreme heat events, droughts, wildfires, floods, and windstorms in North America, Europe, East and South Asia, it’s no surprise that ‘natural disasters and extreme weather events’ is a top-ten concern in emerging markets, while aggregate responses from advanced economies prioritise the ‘failure of climate-change adaptation’.”
Carolina Klint, risk management leader, Continental Europe, Marsh, said: “G20 business leaders are rightly focused on the immediate and urgent economic and geopolitical risks they are facing right now. However, if they are overlooking major technological risks this could create future blind spots, leaving their organizations exposed to severe cyber threats that could seriously impact their long-term success.”